Nike Earnings Conference Call Highlights: FX Pressure and Plans for Converse

Nike Inc. (NYSE:NKE) released its second quarter earnings and discussed the following topics in its earnings conference call.

FX Pressure

Kate McShane – Citi Investment Research asked: With regards to the guidance that you gave for margin pressure for the rest of the world, can you further breakout how much is coming from FX pressure?

Don Blair – VP & CFO responded: I don’t want to try to give you a reconciliation Kate, but what I would say is there is really about four components that I would call out.

One is, certainly, FX. It is going to be more challenging and that’s a big factor.

The second element is that in the second quarter we expected to see an improvement in discounts. It actually was about flat versus last year. So, we are expecting that we are going to see that trend continue.

We are also seeing a very significant strength in our North America business and a little bit weaker results out of our international businesses. That actually has a bit of a mix shift to the downside on gross margins.

Those are really the key factors driving the balance of the year.

Plans for the Converse Brand

McShane: Could you give us any further details on what some of your plans are for the brand over the next 12 months?

Mark Parker – President and CEO responded: We have a great opportunity in China with Converse, certainly positioned from a brand standpoint in a very different way than the NIKE Brand is. So, we’re looking at both the footwear growth there of course.

We’ve seen some good steady healthy growth at footwear in Converse for China, and are also looking to build a stronger base in parallel as well.

We expect that the brand connection with the consumer in China is going to continue to get stronger and stronger for Converse. We’ve seen upgrades happening on a steady consistent basis in our retail presentation so the outlook for Converse in China is actually quite bullish.

We feel good about the relative positioning of Converse versus NIKE, so it’s a real complementary situation between those two brands.

Charlie Denson – President, NIKE Brand responded: The other thing, I’d point out Kate, is we did take over the U.K. market for Converse on January 1 of this year 2011. We’ve seen a really significant acceleration in business results in the U.K.

We feel very confident in this model taking these markets direct, and our ability to grow the business on the top line and the bottom line.